Who Are Your Profitable Customers

Who are your most profitable customers? Knowing your best customers and their value can help you find more like them within your current market or new market expansion. Not all customers offer the same business value, so it’s important to distinguish between the most and least profitable customers.

Who Are Your Profitable Customers

A clear picture of your customer’s value is key to developing and implementing successful marketing and customer relationship management programs. Such knowledge helps you effectively target your promotional, advertising, and marketing campaigns to your audience.

Before you can find new customers and increase profits, you need to understand who your most profitable customers are. The key is to first analyze your customers by developing a snapshot of a customer’s value. Use the information you have about your customers to understand their value. You can differentiate between your most and least profitable customers using these methods:

• Calculate the average amount a customer spends in a single transaction
• Multiply across the number of transactions in a year
• Multiply by the number of years a customer stays a customer
• Factor in the customer purchase amount or the transaction frequency

These calculations can reveal how much each customer spends, how many resources your business ties up, and profits you make on their business. Now that you better understand who you’re already selling to you can develop a marketing plan to reach new customers. Here are a few suggestions on how you can gain new customers:

Referrals
Referrals are perhaps the best affirmation of customer satisfaction. It’s also a way to gain customers with the highest retention rates. These customers tend to purchase more over time and in turn become a source of additional referrals.

Networking
Communicate to others in your network what type of customer you’re looking for. This is an effective way to reach new customers in your target market.

Strategic Alliances
Establish an agreement between a business to pursue an agreed upon objectives needed while remaining independent organizations. As long as there is continued value to the shared audience, strategic alliances produce streams of referral business.

You should continually review the value of your existing customers. Over time, customers who used to be highly profitable might want lower prices. Pay attention to your customers’ future potential as well. It may be worth cultivating a relationship with a small customer with high growth potential.

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